Procedure for registration of trust & for getting it registered with the Income Tax Department for Income Tax exemption and 80G

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Procedure for registration of trust & for getting it registered with the Income Tax Department for Income Tax exemption and 80G

Trusts can be broadly classified into two categories, viz.,—

(i)   Public,

(ii)   Private.

A public trust is one which benefits the public at large or some considerable portion of it. A public trust can be of two types, viz., (a) Public charitable trust, (b) public religious trust.

 

In case of private trust, the beneficiaries are individuals or families. Private trusts are further broadly classified into:—

  1. Private specific trust, also referred to as Private Discretionary Trust with beneficiaries and shares determinate in respect of both.
  2. Private Discretionary Trust where the beneficiaries or their share or either is indeterminate.

The procedure for registration of public charitable & religious trust by CIT is briefly as follows:

  1. Application to be made by the trust or institution in Form 10A. It has to be accompanied by the following documents & records:

(a) original/certified copy of trust deed/instrument and an extra copy, (if created without an instrument, original or certified copy of documents evidencing creation of the trust/institution and an extra copy),

(b) in case the trust is not a new one, two copies of accounts for preceding three years;

(c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be

(d) self-certified copy of the documents evidencing adoption or modification of the objects, if any

(e) where the trust or institution has been in existence during any year or years prior to the financial year in which the application for registration is made, self certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up

(f) note on the activities of the trust or institution

(g) self-certified copy of existing order granting registration under section 12A or section 12AA, as the case may be

(h) self-certified copy of order of rejection of application for grant of registration under section 12A or section 12AA, as the case may be, if any

  1. CIT to verify the application and call for any documents/ information necessary to satisfy himself about the genuineness of the activities of the trust;

  1. Form No. 10A shall be furnished electronically,—

(i)  under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

  1. The CIT to pass order in writing granting or refusing registration (where he refuses registration, he must give an opportunity of being heard to the trust/institution).
  2. Such order to be passed within six months from the end of the month in which the application was received.

For getting the registration u/s 80G, the trust has to get itself registered separately with the Income Tax Act – 1961. It may be noted that only public charitable trust is only eligible for getting registration u/s 80G. Public religious trust cannot get the registration u/s 80G.

It may be noted that,

  1. Registration can be done by the trust established in India for Charitable purpose.
  2. If the Institution or fund is deriving any income, such income should not be liable to inclusion in its total income under the provisions of sections 11and 12 or clause (23AA) or clause (23C) of section 10.
  3. The instrument under which the institution is constituted shall not contain any provision for transfer or application of the income or asset for any purpose other than a charitable purpose.
  4. The institution should not be for the benefit of any particular religious community or caste.
  5. The institution is required to maintain regular accounts of its receipts and expenditures.
  6. Trust should be either constituted as a Public Charitable Trust or a registered society or a company registered u/s 8 of the Companies Act-2013 or is a University established by law, or is any other educational institution recognized by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority.

Rule 11AA of the Income Tax Rules – 1962 provides procedure for seeking approval under section 80G. For registration u/s 80G, trust need to follow the following procedure:

  1. The application for approval has to be done in form no. 10G which shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the assessee
  2. Form No. 10G as referred above has to be furnished electronically,—

(i) under digital signature, if the return of income is required to be furnished under digital signature; or

(ii) through electronic verification code in a case not covered under clause (i).

  1. The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall lay down the data structure, standards and procedure of furnishing and verification of Form No. 10G and shall be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said form so furnished.
  2. Principal Commissioner or Commissioner may call for such further documents or information from applicant or cause such inquiries to be made as he may deem necessary in order to satisfy himself about the genuineness of the activities of the applicant.
  3. here the Principal Commissioner or Commissioner is satisfied that all the conditions laid down in section 80G(5) are fulfilled by the applicant, he shall record such satisfaction in writing and grant approval under clause (vi) of sub-section (5) of section 80G.
  4. Where the Principal Commissioner or Commissioner is satisfied that one or more of the conditions laid down in section 80G(5) are not fulfilled, he shall record the reasons in writing and reject the application for approval after giving the applicant an opportunity of being heard.

 The order granting approval under section 80G(5) or rejecting the application shall be passed within the period of six months from the end of the month in which such application was received.

In computing the period of six months, any time taken by the applicant in not complying with the directions of the Commissioner shall be excluded.

How to form a Charitable Trust:

The trust or NGO etc can be formed under any of the provisions:

  1. By registration under the Indian Trust Act or relevant State Charitable Act
  2. By registering it under the Societies Act
  3. By registering it under section 8 of the Companies Ac-2013.

To register the trust, o ne need to follow the following steps:

  1. Choose an appropriate name for your Trust.
  2. Determine the Author and Trustees of the proposed Trust.
  3. Minimum two Trustees are necessary and there is no limit on the Maximum number. Normally, Settler/ Author generally are not Trustees. It depends upon the choice, will and understanding of other Trustees.
  4. There is no Educational qualification needed to become a Trustee.
  5. Prepare a Memorandum of Association and Rules & Regulations of your Trust. This is known as Trust deed and is extremely essential as the legal evidence of your Trust’s existence. The Trust Deed contains Name, Trustees, Registered Office address, objects, Beneficiaries, Rules For carrying out meeting, Membership fees & Rules, , Rules, Clause, Legal Procedures like appointment, removal or replacement of a trustee, their rights, duties and powers, etc. Proper planning & visions results in sustaining the trust for perpetuity.
  6. After complete of all the legal formalities, a trust is registered and the registration certificate is issued.

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